7 Is No Lucky Number For Divine

Doubts About Deal Growing After Ipo Put Off Again

July 11, 2000|By Rob Kaiser, Tribune Staff Writer.

Although the name Delay.com is already taken, Divine Interventures Inc. could make a good case for claiming it.

The Lisle-based firm, once pitched as a savior for Chicago's dot-com companies, delayed its initial public offering for the seventh time on Monday. A source close to Divine said the firm still expects to go public this week, but the company must now pitch the deal to investors who are increasingly skeptical of its business.

"It went from a darling to a dud," said Jeffrey Hirschkorn, senior marketing analyst with New York-based IPO.com. "I don't think they have the momentum to get it done."

Divine has become the most prominent example in the Chicago area of the challenge being faced by so-called new economy companies throughout the country. These businesses were built on the assumption--no longer true--that unproven Internet-related firms could easily get money from technology-hungry investors.

When the technology-driven Nasdaq market took a nose dive this spring, many of these companies had to run their business plans through the shredder.

Divine has been brasher than most Internet firms since the downturn, rallied onward by the aggressive leadership of its chief executive, Andrew "Flip" Filipowski. In May, the company dumped its lead underwriter, Credit Suisse First Boston, when the investment banking firm suggested postponing the public offering.

Filipowski, who is known as an unusually outspoken executive, also has caused problems with his pronouncements to the press.

A person close to Divine said the IPO's recent delays are a result of the Securities and Exchange Commission forcing the company to reissue its prospectus. The source, whose company has a financial interest in the deal, said the SEC pushed back the offering because of "excessive publicity" about Divine.

John C. Coffee Jr., a securities law professor at Columbia University, said the SEC typically pushes back offerings when corporate executives tout their firms beyond what is filed in their prospectuses with the commission.

In an updated prospectus filed June 29, Divine corrected financial figures that Filipowski used in a May interview with the Chicago Sun-Times about how long the company could survive with the cash it has on hand and when the firm will turn a profit. "The statements made by Mr. Filipowski do not accurately reflect our financial condition," the filing stated.

Analysts said the delays caused by Filipowski's public statements about Divine have done more damage to a company that was already in a tough position because of investor wariness of technology stocks.

"You need a go-public CEO who's very quiet," Hirschkorn said. "The more he opens his mouth, the more damage control the underwriters have to do."

Starting operations last summer, Divine tried to quickly emulate some recent stars on Wall Street--incubator companies that fuel the growth of young Internet firms.

Divine developed its own plan for rapid growth--pulling in $400 million from Chicago-area investors and technology firms, including Microsoft Corp. and Dell Computer Corp., and then quickly filing for an IPOto give the company enough financial muscle to become a major player in the incubation business.